What Do New Realtor Rules Mean For Home Buyers In Minnesota?
When people look to buy a house, the first thing most people do is go on their phones and start looking at properties. If they find one they like, then they usually need to set an appointment with a real estate agent.
Or, maybe they'll stop in at an open house and ask the real estate agent some questions about the house.
When meeting a realtor most buyers eventually ask, "how much do you charge, or what's your cost or fee?" For decades, the answer usually has been, "You don't pay me anything, the seller does."
"You don't pay me for helping you buy a house, the seller does."
The industry normal for years is that a selling agent will split their commission with a buyer's agent. Say the selling agent comes into a contract with a seller and negotiation a 6% commission for selling the house. They then list in the Multiple Listing Service (MLS) the buyer agent's commission which is only visible to members of the MLS. Sometimes they'll split it 50/50 (in this case 3%), or they'll pay the buying agent less (like 2.5%).
National Association Of Realtors Pay Massive $418 Million In Damages In Settlement
The National Association of Realtors has settled a lawsuit and has agreed to pay $418 million in damages.
NAR denies that they have done any wrongdoing with the current model (cooperative compensation model), but they still will be paying the damages over the next four years.
Read Now: Minnesota Pays More For This Fast Food Than Other States
Why is the commission under fire?
The lawsuit came from opponents of the commission model saying that the brokerages were inflating prices on homes and pushing buyers to more expensive properties. The buyer's representation and cooperative commission came out in the 1990s because people worried about buyers having an agent with their best interest.
What has changed now in Minnesota?
Two major things were settled on nationally. First, buyer's brokers need to enter into written agreements with their buyers. That's already been done for years in Minnesota. Minnesota has been ahead of the curve on that front, and agents need to have a conversation upfront about what they do and what they are charging for commission. Now, it's become a national rule.
NAR now won't list buyer's compensations in MLS
Agents now won't see what a buyer's commission will be in a listing in the MLS. Now realtors won't be enticed to show more expensive homes or homes with a bigger commission.
Who pays the buyer's agent commission is now 100% up to the sellers.
For years, sellers would follow the industry normal and pay the buyer's agent commissions out of the total commission. As Kare11 explains it always has been up to the seller to pay, but most just did it. Now, sellers may be more likely to not offer to pay the buyer's agent commission. That means that the person buying the home might have to pay their agent.
NAR New Rules Go In Effect This July
The new rules are going into effect in Mid-July of 2024.